Populist Economics – Infrastructure to Reorient the Economy

The financial crisis of 2008 hit and swept President Obama into office. Many pundits and individuals expected Wall Street individuals to face prosecution and the nation to receive a massive infrastructure stimulus program to put many to work with shovel ready jobs like FDR’s fabled programs. Neither of these items came to be. Eight years later, President Trump came to office with a similar expectation of infrastructure spending. Congress dragged its feet, and the proposed legislation and programs have failed to materialize.

It is frustrating for the average citizen to see this and understand how positive these projects are viewed by the masses yet never come to fruition despite this mass appeal. The American Society of Civil Engineers lists trillions in needs. Governors wish for hundreds of projects. President Obama provided a stimulus loaded with loans and spending on education and health care. President Trump signed a massive tax cut that returned money to taxpayers while loading up future taxpayers with obligations. Neither man could convince his party holding both houses of Congress in its grasp to push through a large infrastructure stimulus.

Why? It’s pure political slop for the key interests. President Obama’s stimulus avoided infrastructure because that is not to the benefit of the Left’s economic coalition. There was no infrastructure boom because it would help ‘the other side’. Look at where money has gone and the same bubbles have inflated: education, housing, financial, etc. The productive economy is a red team interest now. The Left’s coalition is the 1% joined together with the very poor. Some very large wealth transfer industries like education, government and health care are big donors with regulatory capture and heavy political donations, so they do get money sent their way in grants as well as loans to individuals to then purchase those goods. Loans are merely the conduit for wealth transfer. This applies to government welfare that is now a pipeline for EBT friendly retailers. Forced consumption.

President Trump represents the middle class voters as well as the broadly defined working class, which would make up a large contingent of any infrastructure network. The problem is that the GOP is has an ideology that dogmatically pushes less government intervention. This is because as the party not truly wielding power like in the bureaucracy, even when nominally in power, they stick to a wink wink reduce spending to restrain government. They do not control the permanent government therefore they seek to defang it.

Forever altering tax cuts is their method, yet today is not akin to the drastic reductions LBJ put through congress or even Reagan. These are tweaks. There is no shock to the system and with so many Americans paying $0 or less in taxes, the needle is not moved much financially or electorally. Corporations are already using this money for stock buybacks and merger and acquisition activity. That consolidation will most likely mean more job cuts due to efficiency gains and the need to earn a solid return on investment on the acquisition.

What is needed is a $1.5 trillion infrastructure only stimulus that is not spread over a decade but in two years. This program must be targeted to improve the capabilities of the American economy going forward, not simply pork for congressional donors. This program must also take into account the coming automation wave that is going to affect labor and reward a business atmosphere with lower input costs. Creating projects that help with energy efficiency and cheaper energy generation is key.

A massive push for upgrading the electrical grid can cut down on transmission losses and electricity waste. Just removing waste would have a positive environmental effect by reducing the need for more electricity generation. We all want to believe alternative energy like solar and wind can become baseline power generation, but for any environmentalist obsessed with CO2 emissions, nuclear power is the future. France generates over 80% of its electricity via nuclear, and America could, too. Safety is a concern so new generation pebble bed reactors would provide cheap, CO2 friendly electricity. If placed in geographic locations closer to where electricity is consumed, we could further reduce the waste in transmission.

This infrastructure plan must harden our electricity grid from any EMP attacks or solar flares, it must provide metropolitan areas with money for commuter rail systems to enable smart development, and it must invest in problematic projects like water infrastructure replacement in cities (example being Atlanta). The projects must be spread out across America, helping both red and blue counties with long term investments that will have decades’ worth of effects, not just repaving highways. This will aid in our re-industrialization, which is now not just an economic issue but a national security issue. Our supply chains are now dependent on China who is not our friend but a rising, global competitor.

Many American cities do not have the population density to merit subways, but nearly all metropolitan areas can use federal funding to jumpstart commuter lines to allow for smarter growth and more pro-environmental policies of development. With an eye on the future with driverless car networks, one can see how we can greatly reduce our oil products by pairing commuter rail networks to move millions of Americans to stops with waiting fleets of driverless vehicles to take them to their final destination. A problem commuter rails face is the spread out location of workplaces from potential stops in cities where bus routes do not go. Buses themselves are often inefficient public transport.

This is not just about use of oil and efficiency for America’s energy use. This affects land use and the CO2 concerns of the left. Land conservationists of all political stripes should rejoice over this. Environmental concerns in America have been reduced to a CO2 obsessed either/or fight. Environmental concerns should focus policy on enabling denser growth of suburbs so to not be in churning more land into sprawl. Many blue cities would benefit from a red team oriented infrastructure stimulus program.

Many cities across the Midwest and South are tailor made for commuter rail programs with established suburbs and exurbs ringing the city core. Commuter rails would remove cars from the road alleviating congestion and pollution. This would also reduce road maintenance by a reduction in vehicles on the roads, and slow growth in use of the routes alleviating needs for expanding lanes. The last mile will be covered by Uber, Lyft, and the growing e-bike and e-scooter start ups. The additional benefit that some suburbs (often GOP leaning) do not realize is that with a commuter rail into a city, it can remove traffic concerns of the daily commute as a factor some home buyers would have in selecting where to move. This would be a lure for bedroom communities to avoid losing residents as the next hot suburb develops elsewhere. Keep these privately operated to prevent public union involvement, and prevent the expensive collective bargaining agreements that burden older Northeast metro public transit systems with excessive employee costs from ever forming.

This is a program that places money in many different hands across the nation. With a two year timeline, it would shock the construction industry as well as the materials supply and raw natural resource industries. The spillover employment effects would be immediate. This would help reorient the American economy towards a more productive nature and away from the over-financed nature of today’s status quo. The construction and materials boom would also be huge for the millions of American men unemployed but still wanting to work. The supply of labor being there will help with keeping wage costs in check, but the pull of millions into a$1.5 trillion program would cause other industries to have to be financially competitive to keep talent. Other industries would need to pay competent workers more to retain them allowing labor to enjoy a bit of the productivity gains they provide.

President Trump’s proposal which called for private investment is a good step to creating such a program. Public-private partnerships are the path to rebuilding our infrastructure. When reporters discuss China’s projects, they falsely will say capitalism grew China to prominence. This is not true. China receiving favored access to American markets dragged them forward economically, but so did a state directed capitalism partnership with the nation’s interests placed first. These large projects can be bid on by private entities that want to invest and make some money off of the projects while the government can guarantee the contracts awarded for the projects.

The GOP is stuck in supply side mode and thinks tax cuts begets investment. We have decades to review to see this does not quite happen. Large endeavors allow for large employers to be subsidized by the requests of the federal government. How much innovation and advancement has DARPA and other large Defense Department contracts inspired? There are some risks that are too much for any firm to approve for internal R&D. The GOP also has to understand that their voter base knows that the last few decades of tough stances on social issues or fighting the left somehow never materialized into anything but tax cuts.

The Democrats must understand that public-private partnerships can be productive when geared towards building infrastructure and service providers that will generate a return and help all regional businesses. The leases can be set for whatever term so that bidding is consistent enough to force private providers to perform well. The Metro in DC is a locus of dysfunction and possibly corruption, but privately operated transit that has to worry about earning a bid would provide service like is seen in Japan. Not all public-private partnerships are like the Chicago parking meter rip off. That was an atrocious lease of 75 years (in effect a sale) that involved an asset that has no positive spillover effects (parking meters).

Government run projects and entities are not as efficient as the private, with plenty of examples all around us. What we can do is pair government tax revenue, private investment, private operations guaranteed in a government contract. Bidding must involve multiple firms, and we should leave this open to foreign companies as the Japanese have expressed strong interest in investing in American infrastructure. Anyone who has ridden Japanese trains knows that they are enjoyable, privately run, and could happen here.

There is also a very populist element to this that few would ever discuss in the media. These are blue collar jobs and skilled blue collar jobs that would find skill fits with the middle and even left hand side of the bell curve. There is no academic hurdle requiring $50,000 paid for the four year Debt Vacation we call a Bachelor’s Degree. Liberals think that with enough education everyone can become a PhD in physics. Forget that, no one believes that but the truest of true believers, but they all say this. Reality tells us that not everyone is destined for discoveries in STEM fields.

These jobs can provide opportunity for careers and community investment. Not just this but it provides those who will not make the media anointed glamorous white collar world of powerpoint presentations and client visits with the ability to make good money and form a family. A salary of $50,000 might be scoffed at by the desk jockey in the high cost San Francisco or New York metropolitan areas, but that will allow a man or woman to build a family in Ohio, Michigan, Missouri, Wisconsin and even the Carolinas. If any politician wants to win battleground states, they would be hard pressed to find a better way to reach the voters who voted for Obama in ’08 and Trump in ’16.

A $1.5 trillion dollar program over two years is ambitious and comes with sticker shock. How would we pay for it? More debt? There is a way to pay for this without adding a dime to the federal debt and while not taxing income. There’s a way to do it while also addressing the wealth disparity that exists in America. I will get to that in a later essay. For now, let us focus on this policy, which reaches millions, provides jobs not handouts and can help thousands of communities find rejuvenation and meaning in the shared objective of rebuilding America.